IRAN PAKISTAN GAS PIPE LINE, CAPACITY, POSSIBLE HURDLES POSSIBLE SANCTIONS

President Asif Ali Zardari led a 300-member delegation from Islamabad to Iran, where officials from both countries attended a ceremony inaugurating the project. The 1,244-mile pipeline would each day transport more than 750 million cubic feet of natural gas to Pakistan from Iran's South Pars gas field in the Persian Gulf. Pakistan produces only 30% of the natural gas it needs, while Iran has the world's second-largest natural gas reserves. Many of Pakistan's factories and its transport system rely heavily on natural gas -- about 21% of the country's vehicles run on compressed natural gas. Pakistan has high stakes in the pipeline bringing gas from Iran. There are however serious hurdles in the way of its becoming functional, the most important being a stiff opposition from the US. Similar opposition is expected from the Saudi government, whose prerogative remains containing Iran. The U.S. has repeatedly warned Islamabad that forging ahead with the pipeline project could expose Pakistan to economic penalties under the Iran Sanctions Act. The internal threats to the pipeline emanate from the Baloch separatist organizations and from anti-Shia, anti-Iran militant networks. The militant groups can be used as proxies by the outside forces to bomb and disrupt the pipeline. Power shortages have badly impaired the countrys economy by slowing down industrial production, weakening the countrys agricultural capacity and having a damaging impact on business in general. Thousands of workers have been rendered unemployed while the income of those working as daily wage earners have been reduced. The growing dependence on costly furnace oil for the production of thermal power continues to raise electricity charges. The pipeline is vital for Pakistan. It would help shift the domestic gas production that currently hovers around 4.2 billion cubic feet per day to the industrial sector. The measure would enhance industrial output, bring laid off workers back to the factories and create more jobs. The gas that the country would be importing from Iran would allow the generation of additional 4,123 megawatts of electricity at cheaper rate. It will also restore the 2,232 megawatts of idle thermal power generation capacity with the diversion of about 406 mmcfd, leaving 344 mmcfd for other uses such as manufacturing fertilizer and supplying gas to domestic consumers. While Pakistan would pay Iran $3 billion a year, it would reduce its oil imports by $5.3 billion, resulting in a net annual reduction in energy imports by about $2.3 billion.

The pipeline however constitutes a threat to US strategic aims. The US plans involve strangulation of the Iranian economy through sanctions to force Tehran to abide by the US diktat. On top of that, Iran has announced plans to build a 4,000 barrel-a-day oil refinery at Gwadar that would further undercut U.S. sanctions and eventually ensure energy supplies going to China, even if the Gulf's strategic Strait of Hormuz is closed. The threat of the US sanctions has stopped a number of countries from financing the pipeline. If Iranian gas begins to arrive in Pakistan, it would be another proof that, despite being a super power, the US is gradually losing hold over the world. While brandishing the threat of sanctions against Pakistan, the US is cautiously weighing their possible effects. Pakistans territory provides the cheapest exit to the US forces withdrawing from Afghanistan. Pakistans help is required to restore peace in postoccupation Afghanistan. The consequences of a further ratcheting up of the anti-US sentiment in the nuclear armed Pakistan cannot either be easily ignored. Even if the US was not to urgently impose sanctions on Pakistan, it is likely to use Saudi Arabia and Qatar to pressurize Pakistan to abandon the pursuit of the Iranian gas. U.S. officials have tried to convince leaders in Islamabad that Washington can help solve Pakistan's energy crisis through the construction of hydroelectric dams and other projects that beef up the country's power grid. Looming as a bigger hurdle for Pakistan is its ability to finance its segment of the project, which is expected to cost as much as $1.5 billion. Iran has agreed to provide a $500-million loan to help pay for the work, but it remains unclear whether Pakistan can succeed in raising the additional $1 billion through surcharges tacked on to electricity bills. Many Pakistani power consumers don't pay their bills, and utility companies have struggled to find ways to clamp down on delinquent customers.